How to Make Business in Africa

A Guest Article by Daniel Girma

Every business man and entrepreneur on every continent asks so many questions which might be general or specific to their subjects. But all of the sudden, the collected information will be merged to form enough evidence to start business in confidence. That’s why, in this article we try to show some of the mandatory points that will be raised at the beginning or after starting business in Africa.

Business in Africa - What will be the opportunity?

There are so many untouched business opportunities for business in Africa which can be applied or needs to be improved. Since almost all the African countries are in the process of transformation stage, even the crucial business opportunities are limitless. Energy, Referral Hospital, or Construction (e.g. real estate, road and similar) are just some important investment areas. Upcoming business trends for business in Africa include modern agriculture, chemical industry, cosmetics industry, and the cotton industry – which expands more and more global.

According to World Bank information, about 48.5% of sub-Saharan population is limited by money to try, change, or connect with new technology. Sometime we say "Thanks to China" which makes these things easy to access or affordable.

So what are the Disadvantages?

The main questions that shall be raised during planning to invest in Africa includes to have a look at the educated labor force and Infrastructure.

What matters is not only the quantity but also the quality of education. Most of the time for big projects, many of the things are compiled by Europeans or Chinese citizens. If you take big architect or sophisticated projects, design and implementation are carried out with non-Africans.

When we talk about business in Africa and you come to infrastructure, there is a continuous improvement going on. Angola, Nigeria, Kenya, Namibia, Morocco, Ethiopia are some of the listed countries. According to the Africa infrastructure country diagnostic, African governments spend about $45 billion, about one-third of which is contributed by donors and the private sectors per year in infrastructure. Two-thirds of the public sector money is used to operate and maintain existing infrastructure and one-third is to finance new projects.

Common business culture

The common African culture previously affects women’s participation in large scale and therefore business in Africa. These days the traditional thinking is showing a good progress but still not totally eliminated from the society. We can observe these problems mainly in Sudan, south Sudan, Somalia, and Djibouti. Based on 2012 world bank information, average women's participation in Africa reaches more than 50%.

Currently, there is a continuous improvement going on throughout the continent. Africa needs about $95bn a year to close an infrastructure gap in electricity, roads, railway and port. Current investment is running at about $45bn, leaving a large shortfall. But still something is better than nothing.

In order to ask bank loan, foreign investors should pass the minimum capital requirement which is requested by the country. If we take Ethiopian investment proclamation as an example: it says any foreign investor to be allowed to invest shall be required to allocate a minimum capital of USD 200,000 for a single investment project. So, the banks indirectly need to see the started business and its success. Once the business starts running, bank loan can be permitted for further expansion or upgrading purpose.

Conclusion

Regarding this article about business in Africa, it only shows a general concept about what Africa looks in a side view. But even if all the different countries found in Africa represented by the name Africa, there is a huge gap in development, economy, natural resources, culture, political stability, an environment. This is comparable to Asia. The truth might differ with individual perspective after visiting in your own eyes. Some might say, more than I expected and some might not.